Results of COVID-19 Expected to Upset Meat Producers
Beef supply concerns from all across Canada continue to come in in as the new Coronavirus pandemic continues to persist. Due to the general public safety measures by the authorities, slaughter plants in Canada and the US are lowering line speeds, shifts, and temporary closures in other cases. These steps are due to Covid-19 concerns, and analysts are stating that meat supplies are probably to be struck hard.
Kevin Grier, a market analyst, says that Canadian slaughter activities are probably to decline by at least 5% in the second quarter of the year and that he says “is if we are lucky.” He further told those on a webinar organized by marketing intelligence firm J.S. Ferrero that “Production is much, much slower than normal.” The slow production rate brings a big problem for cattle keepers.
The persistence of Covid-19 has caused a short-term closure of the Cargill plant at High River in Alta. The packer is one of the leading meat packers on the Prairies. Several workers at other leading meat packing plants in JBS in Brooks in Alta have tested positive to Covid-19, causing a lot of challenges in operations due to employee shortage. The plant, as of last week was running barely on a single shift, and this has substantially reduced its daily slaughter operations.
On the other hand, several American meat packing plants that deal with Canadian animals have also stated decreases in their slaughter activities, and others have temporarily stopped operating because of the staff being infected with the virus as well. Tyson meat plant in Pasco, Washington, has briefly closed while the JBS plant in Greeley, Colorado, was planning to open last week after its temporary closure at the beginning of the month.
According to Grier, beef has come to be far more expensive at the counter compared to pork and chicken. He says “Beef costing has become uncompetitive relative to the other two main types of meat.”
According to Statistics Canada, Canadians prefer to eat out more commonly as compared to eating at home. The pandemic has changed this as a good number of full service restaurants have underwent a forced shutdown as the fight to control the growth of the virus continues. The effects of the pandemic continue to be felt badly in the third quarter of this year as people focus more on paying the new years expenses during the first quarter. Grier further predicts that in the 2nd and 3rd quarters, food sales will be about 20% of what they are now, while fast food service restaurants like McDonald’s could possibly keep 40% of their sales.
During the same webinar, an American agricultural economist, Rob Murphy, reported that limited packaging capacity had resulted in a disconnect between meat prices and live animal prices. He emphasized that panic buying as a result of Covid-19 contributed to strong margins among the packers.
Many slaughter plants in the US could be facing a slip of as much as 9% due to slower processing speeds and temporary closure of meat packing plants as a result of the Coronavirus pandemic. Murphy states that “We think that’s going to persist, that you’re going to continue to see those types of problems that will lead to year over year declines in steer and heifer slaughter, at least for the next couple of months and maybe beyond.”
Murphy also stated that price levels for cash cattle are most likely to continue decreasing because the cattle suppliers need to move the cattle, and there is not a great deal of leverage with the packer. The feed yard placements are also most likely to fall in the coming months, thus lowering inventory, and this signifies a drop in beef supply.